The recent announcement by Finance Minister Chrystia Freeland regarding the extension of the ban on foreign home purchasing in Canada has sparked discussions about its impact on housing affordability and its effectiveness as a policy measure.
Initially introduced in 2022, the ban prohibits foreign nationals and commercial enterprises from buying residential properties in Canada, with exceptions made for certain groups such as international students, refugee claimants, and temporary workers. The extension, set to last until the beginning of 2027, aims to ensure that houses are primarily used as homes for Canadian families rather than being treated as speculative financial assets.
While the intention behind the ban is clear, experts have raised questions about its efficacy in addressing housing affordability issues. Data from previous years indicate that the share of the housing market owned by non-Canadians is relatively small, with figures ranging from two to six percent in some provinces. For instance, in 2021, only around 1.1 percent of home sales in British Columbia involved a foreign buyer.
Moreover, there are additional exemptions to the home buying rules, such as the purchase of buildings with four or more residences, as well as provisions for certain less populated areas. This has led some, including Brendon Ogmundson, the chief economist for the B.C. Real Estate Association, to suggest that the ban may have more political motives than tangible economic or housing policy benefits.
The issue of housing affordability has become a significant political concern in Canada, with the Canada Mortgage and Housing Corp. (CMHC) highlighting the need for 3.5 million additional homes by 2030 to address the affordability crisis. Conservative Leader Pierre Poilievre has been particularly vocal about the housing crunch, proposing measures to incentivize housing starts and encourage municipal cooperation in meeting housing targets.
In response to the crisis, the federal government has engaged in negotiations with major cities to link federal funding through the Housing Accelerator Fund to zoning reform and other pro-building policy changes at the municipal level.
As discussions continue regarding the effectiveness of measures like the ban on foreign home purchasing, it remains essential for policymakers to consider a comprehensive approach to addressing housing affordability that balances the interests of Canadian families with broader economic goals.
